Trade finance during the great trade collapse jean pierre chauffour and mariem malouche

Trade Finance
during the

Great Trade
Collapse
Editors
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Trade Finance
during the Great
Trade Collapse



Trade Finance
during the Great
Trade Collapse

Jean-Pierre Chauffour and Mariem Malouche
Editors


© 2011 The International Bank for Reconstruction and Development / The World Bank
1818 H Street NW
Washington DC 20433
Telephone: 202-473-1000
Internet: www.worldbank.org
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1 2 3 4 14 13 12 11

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ISBN: 978-0-8213-8748-1
eISBN: 978-0-8213-8749-8
DOI: 10.1596/978-0-8213-8748-1
Library of Congress Cataloging-in-Publication Data
Chauffour, Jean-Pierre.
Trade finance during the great trade collapse / Jean-Pierre Chauffour and Mariem Malouche.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-8213-8748-1 — ISBN 978-0-8213-8749-8 (electronic)
1. Export credit. 2. Exports—Finance. 3. Financial crises. 4. International trade. I. Malouche, Mariem,
1973- II. Title.
HG3753.C435 2011
332.7'42—dc22
2011012219

Cover photos: © moodboard/Corbis (Money Rolls); Adobe Image Library (background)
Cover design by Tomoko Hirata/World Bank


contents

Foreword
Acknowledgments

xiii

About the Editors and Contributors

xv

Abbreviations

xix

Overview
Section I
1

SPECIFICITY OF TRADE CREDIT AND TRADE
FINANCE DURING CRISES
Trade Credit versus Bank Credit during
Financial Crises
Inessa Love

2

Firms’ Trade-Financing Decisions during Crises
Daniela Fabbri and Anna Maria C. Menichini

3

Interfirm Trade Finance: Pain or Blessing during
Financial Crises?
Anna Maria C. Menichini

4

Financial Crisis and Supply-Chain Financing
Leora Klapper and Douglas Randall

Section II TRADE FINANCE DURING THE 2008–09 CRISIS:
INNOCENT OR GUILTY?
5

6

xi

Trade Finance in the 2008–09 Financial Crisis:
Evidence from IMF and BAFT–IFSA Surveys of Banks
Irena Asmundson, Thomas Dorsey, Armine Khachatryan,
Ioana Niculcea, and Mika Saito
Global Perspectives in the Decline of Trade Finance
Jesse Mora and William Powers

1
25
27
41

59
73

87
89

117
v


vi

7

Contents

The Role of Trade Finance in the U.S. Trade
Collapse: A Skeptic’s View
Andrei A. Levchenko, Logan T. Lewis, and Linda L. Tesar

133

8

Trade Finance in Africa: A Survey of Firms
John Humphrey

149

9

Financial Crises and African Trade
Nicolas Berman and Philippe Martin

161

10

World Bank Firm and Bank Surveys in
14 Developing Countries, 2009 and 2010
Mariem Malouche

173

Private Trade Credit Insurers during the Crisis:
The Invisible Banks
Koen J. M. van der Veer

199

Trade Finance in the Recovery of Trade Relations
after Banking Crises
Cosimo Beverelli, Madina Kukenova, and Nadia Rocha

213

11

12

Section III UNDERPINNINGS OF TRADE FINANCE
INTERVENTION DURING FINANCIAL CRISES
13

14

The Theoretical Case for Trade Finance in
a Liquidity Crisis
Tore Ellingsen and Jonas Vlachos

235

Why Boosting the Availability of Trade Finance
Became a Priority during the 2008–09 Crisis
Jean-Jacques Hallaert

245

15

Market Adjustment versus Market Failure
Jean-Pierre Chauffour and Thomas Farole

16

Should Developing Countries Establish
Export Credit Agencies?
Jean-Pierre Chauffour, Christian Saborowski, and
Ahmet I. Soylemezoglu

Section IV INSTITUTIONAL TRADE FINANCE SUPPORT
DURING THE 2008–09 FINANCIAL CRISIS
17

233

World Trade Organization Response to the Crisis:
A Convening Power to Boost the Availability
of Trade Finance
Marc Auboin

257

273

287

289


Contents

18

19

20

21

22

23

The World Bank Group’s Response to the Crisis:
Expanded Capacity for Unfunded and Funded
Support for Trade with Emerging Markets
Bonnie Galat and Hyung Ahn
Regional Development Banks’ Response to
the Crisis: Scaling Up the Trade Finance Facilities
Rudolf Putz, Ghazi Ben Ahmed, Steven Beck,
and Daniela Carrera

vii

301

319

Credit Insurance in Support of International Trade:
Observations throughout the Crisis
Fabrice Morel

337

Business Responding to the Financial Crisis:
Setting Up a Policy Agenda for Trade Finance
Thierry J. Senechal

357

Private Bankers’ Response to the Crisis:
Warnings about Changes to Basel
Regulatory Treatment of Trade Finance
Donna K. Alexander, Tan Kah Chye, Adnan Ghani, and
Jean-Franỗois Lambert

373

Trade Finance under the Current Basel
Regulatory Framework: What are the Issues?
Marc Auboin

385

Index

393


viii

Contents

Boxes
5.1
The IMF/BAFT-IFSA and Other Bank Surveys
5.2
Key Findings and Observations from the
Fifth Trade Finance Survey
6.1
Common Types of Trade Finance and the Risk for Exporters
10.1
Policy Update on Selected Countries and Multilateral Initiatives
19.1
Terms and Conditions of TFI Credit Products
19.2
IDB Trade Financing Increases Intraregional Transactions
20.1
Credit Insurance and How It Works
20.2
The Berne Union
Figures
O.1
Trade Fluctuations by Region, 2007–10
O.2
Trade Finance Arrangements, by Market Share
2.1
Regime where the Incentive Motive Dominates
2.2
Regime where the Liquidation Motive Dominates
2.3
Trade Credit Intensity, Wealth, and Creditor Protection
2.4

Input Tangibility, Wealth, and Creditor Protection
4.1
Extension of Trade Credit, by Country
4.2
Changes in the Extension of Trade Credit, by Country
4.3
Access to Bank and Supplier Financing, by Country
4.4
Trade Credit and Liquidity
5.1
Trade Finance Arrangements, by Market Share
5.2
Merchandise Trade Index, 2007 to mid-2010
5.3
Global Funding Pressure, 2008 to mid-2010
5.4
Three-Month LIBOR Spreads in Advanced Markets
5.5
External Debt Market Spreads in Emerging Markets,
2008 to mid-2010
5.6
Loans to Nonfinancial Firms in the Euro Area and
U.S., 2007 to mid-2010
5.7
U.S. Commercial Paper: Outstanding Accounts,
2008 to mid-2010
5.8
Overall Changes in Merchandise Exports and Trade Finance
5.9
Changes in Merchandise Exports and Trade Finance,

by Country Group
5.10
Estimated Composition of the Trade Finance Industry
5.11
Overall Change in Trade-Related Lending Guidelines,
Q4 CY09 vs. Q4 CY08
5.12
Ability to Satisfy “All Customer Needs”
5.13
Effect of “Recent Developments” on Pricing of
Trade Instruments
5.14
Change in Trade Instrument Pricing
5.15
Change in Probability of Default, 2007–09

97
114
119
189
325
330
338
354

2
4
49
51
53

54
75
76
78
83
90
92
93
94
95
95
96
100
101
102
104
106
110
111
113


Contents

6.1
6.2
6.3
6.4
6.5
6.6

6.7
6.8
9.1
9.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10A.1
11.1
12.1
12.2
12.3
12.4
12.5
16.1
16.2
18.1
18.2
18.3
19A.1
19A.2
20.1
20.2

20.3
20.4

Tightening Domestic Loan Standards
Domestic Commercial Lending
Global Merchandise Exports
Global Cross-Border Banking Activity
Short-Term Financing Received
Export Credit Insurance Exposure
Trade Financing Debt, by Country
Relative Declines in Exports, Export Insurance Exposure,
and Trade Finance Debt, by Region, Q2 FY08 to Q2 FY09
African Exports after Financial Crisis in Partner Country
African Exports after Financial Crisis
Export and Import Growth in Surveyed Countries
Postcrisis Export Growth and Constraints among
Surveyed Firms
New Market Exploration in Developing Countries
Severity of Export Constraints due to 2008–09 Crisis,
by Country
Sources of Export Market Constraints
Trade Finance Changes and Effects on Export Firms
Constraints on Bank-Intermediated Trade Finance, by Country
Export and Import Trade Finance, India and South Africa
Export and Import Trade Finance, Ghana and Kenya
Export and Import Trade Finance in Turkey, by Instrument
Export and Import Growth, by Country
How Private Trade Credit Insurance Works
Survival of Trade Relations after Banking Crises
Recovery of Trade Relations, by Experience Level

Recovery of Trade Relations, by Size
Experience, Trade Credit Dependence, and Recovery of
Trade Relations
Size, Trade Credit Dependence, and Recovery of Trade Relations
World Trade and Trade Insurance Volumes
Medium- to Long-Term Export Credit Insurance
Number of GTFP-Covered Banks in Emerging Markets,
by Region
Shares of GTFP-Issued Guarantees in 2010, by Region
GTLP Supply-Demand Overview
TFFP Transactions since 2005, by Number
TFFP Transactions since 2005, by Value
ST Exports Covered, 2005–09
ST Credit Limits, Q1 CY05 to Q2 CY10
Change in ST Credit Limits, Q4 2007–Q2 2010, by Region
ST Export Insurance Claims Paid, 2005–09

ix

120
121
121
123
123
125
126
126
167
169
175

176
177
179
180
181
182
184
186
187
194
202
217
220
221
222
223
275
277
304
305
314
335
336
341
342
345
345


x

Contents

20.5
20.6
20.7
Tables
O.1
4.1
4.2
4.3
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10
7.1
7.2
7.3
8.1
11.1
12.1
12.2
12.3
12.4

12.5
12.6
12.7
12.8
12.9
15A.1
20.1
20.2
20.3
20.4
20.5

MLT New Exports Covered, 2005–09
MLT Exports Covered, 2005–09
MLT Claims Paid, 2005–09

Overview of Trade Finance Products
Description of FCS Sample
Countries Hardest Hit by the 2008–09 Crisis
Regression Results
Summary of Bank Survey Respondent Characteristics
Changes in Merchandise Exports and Trade Finance,
by Country Group
Reasons for Decline in Value of Trade Finance
Change in Trade-Related Lending Guidelines: Tightening
Change in Trade-Related Lending Guidelines: Loosening
Pricing Changes by Bank Size, Q4 CY08 vs. Q4 CY07
Pricing Changes by Bank Size, Q2 CY09 vs. Q4 CY08
Pricing Changes by Bank Size, Q4 CY09 vs. Q4 CY08
Reasons for Trade Finance Price Increases

Impact of Basel II on Trade Finance Availability
Summary Statistics, Q2 2008–Q2 2009
U.S. Imports and Financial Variables, Q2 2008–Q2 2009
U.S. Exports and Financial Variables, Q2 2008–Q2 2009
Potential Impacts of Financial Crises on Trade Finance, by Type
EU Countries’ State Aid to the Short-Term Export
Credit Insurance Market
Recovery Time after Banking Crises, 1996–2009
Survival of Trade Relations after Banking Crises, 1996–2008
Effect of Banking Crises on Trade Relations Survival
Recovery Time, by Experience Level
Recovery Time, by Exporter Characteristic
Recovery Time and Financial Dependence
Recovery Time and Financial Dependence
Financial Dependence, Exporter Characteristics, and Recovery
Financial Dependence, Exporter Characteristics, and Recovery
Governments and Multilateral Institutions that Took
Trade Finance Measures, as of April 2009
Market Shares of Private and Public ST Credit Limits, 2006–10
Shares of ST Credit Limits, 2005–09, by Destination Region
ST Claims Paid, 2008–09, by Destination Country
ST Claims Paid in Selected Emerging Markets,
by Destination Country
Shares of MLT Exports Covered, 2005–09,
by Destination Region

350
351
352

5
77
79
80
98
99
103
105
105
107
108
109
112
112
139
141
143
151
208
214
216
217
219
223
224
224
225
226
269
343

344
346
347
351


Foreword

The bursting of the subprime mortgage market in the United States in 2008 and
the ensuing global financial crisis were associated with a rapid decline in global
trade. The extent of the trade collapse was unprecedented: trade flows fell at a
faster rate than had been observed even in the early years of the Great Depression.
G-20 leaders held their first crisis-related summit in November 2008. The goal
was to understand the root causes of the global crisis and to reach consensus on
actions to address its immediate effects. In the case of trade, a key question concerned the extent to which a drying up of trade finance caused the observed
decline in trade flows.
There are different types of trade finance. Banks offer a number of trade
finance instruments that vary in terms of risk. A large share of global trade finance
is also provided on an interfirm basis—that is, involving contracts between buyers
and suppliers. It rapidly became obvious that the data on global trade finance
flows (by type of products, providers, or markets) were incomplete. This dearth of
data complicated the estimation of a possible trade finance “market gap” and of
whether trade finance was indeed a major factor driving the fall in global trade.
An implication for policy was whether governmental intervention in favor of a
specific segment of the financial system—the trade finance market—was necessary and, if so, what form such support should take.
The G-20 quickly reached broad agreement that the international community
needed more information and knowledge about trade finance markets and also
needed to consider expanding trade finance liquidity. International agencies, the
financial industry, and analysts cooperated to act on three fronts: (a) collecting
data to better inform decision makers on the prevalence of trade finance market

constraints; (b) helping design a quick and effective institutional and governmental response to restore confidence and liquidity in the trade credit market; and (c)
better understanding the effects of the changes in the international regulatory
framework for the banking sector on the supply of trade finance.
xi


xii

Foreword

In response to the crisis, the International Finance Corporation—the private
sector arm of the World Bank—doubled the capacity of its Global Trade
Finance Program in late 2008 and, in collaboration with other development
finance institutions, set up a Global Trade Liquidity Program in July 2009 to
channel additional liquidity to finance trade transactions. In addition, the
World Bank undertook a series of bank- and firm-level surveys in developing
countries to gauge the impact of the crisis, complementing other institutional
surveys conducted in advanced and emerging economies.
This book brings together a range of projects and studies undertaken by development institutions, export credit agencies, private bankers, and academics to
shed light on the role of trade finance in the 2008–09 great trade collapse. It provides policy makers, analysts, and other interested parties with analyses and
assessments of the role of governments and institutions in restoring trade finance
markets. A deeper understanding of the complexity of trade finance remains critical as the world economy recovers and the supply of trade finance improves. The
international community continues to know too little about the fragility of lowincome economies in response to trade finance developments and shocks, as well
as about the ability and conditions of access to trade finance by small and medium
enterprises and small banks in developing countries. Similarly, there is uncertainty regarding the impact on trade finance of recent changes in the Basel III regulatory framework.
We hope that the contributions to this volume are just the start of a broader
effort to undertake more research and analysis on an important, and neglected,
segment of the financial market. Such analysis is conditional on the availability
of timely and comprehensive data on the cost and volume of trade finance as
well as the probability of default trade finance products. As discussed in a number of chapters in this book, generating such data requires a collective effort,

which we hope will be put in place and sustained in the coming years.
Bernard Hoekman
Director, International Trade Department
Poverty Reduction and Economic
Management
World Bank

Georgina Baker
Director, Short Term Finance
International Finance Corporation
World Bank Group


Acknowledgments

The editors are grateful to all the contributors in this book who have willingly
embarked on this endeavor and offered their time, energy, and ideas to help
advance our collective knowledge on the role of trade finance during the 2008–09
global economic crisis. We have been particularly blessed to count on most actors
that played a significant role during the financial crisis, be it international or
regional institutions, government bodies, private sector players, or academia. This
rich and unique combination of views and analyses on the relationship between
trade and trade finance in times of crisis constitutes the real value added of this
book. It would not have been possible without the willingness of all the contributors to share their considerable expertise and their devotion to the purpose of
this book.
The production of such a book would not be possible without the involvement, commitment, and dedication of many other individuals. Bernard Hoekman, director of the World Bank International Trade Department, provided the
overall intellectual guidance for this project under the direction of Otaviano
Canuto, Vice President of the Poverty Reduction and Economic Management
(PREM) Network. Mona Haddad, manager of the PREM Trade Unit provided
unfailingly generous support, suggestions, and help, whenever needed. The book

also immensely benefited from the inputs and comments from peer reviewers:
Hamid Alavi, senior private sector specialist, and Valeria Salomao Garcia, senior
financial sector specialist, at the World Bank; and Michael Hadjimichael, deputy
director at the Institute of International Finance (IIF).
But a book cannot exist without an effective production team. This book
benefited from the impeccable professionalism of the World Bank’s Office of the
Publisher. Stephen McGroarty, Theresa Cooke, and Andres Meneses managed
the publication process so efficiently and diligently that we hardly noticed it.
Mary A. Anderson carefully edited all of the contributions to deliver a harmonized manuscript. We would also like to thank the dedicated and professional
xiii


xiv

Acknowledgments

support provided by the administrative team in the International Trade Department, including Cynthia Abidin-Saurman, Rebecca Martin, Anita Nyajur,
Marinella Yadao, and Amelia Yuson. Special thanks also to Charumathi Rama Rao,
who provided support on the financial management aspects of the project, and
to Stacey Chow for her infectious energy throughout the publication and dissemination phases.
Last but not least, we would like to thank the governments of Finland, Norway,
Sweden, and the United Kingdom for their financial support under the Multidonor Trust Fund for Trade and Development (MDTF-TD). The MDTF-TD supports the World Bank’s international trade strategy, which focuses on helping
developing countries benefit from their integration into the global economies and
making the world trading system more supportive of development.
The editors


About the Editors and
Contributors

Jean-Pierre Chauffour is a lead economist in the International Trade Department
of the World Bank, in the Poverty Reduction and Economic Management Network,
where he works on regionalism, competitiveness, and trade policy issues. Prior to
joining the Bank in 2007, he spent 15 years at the International Monetary Fund,
where he held various positions, including mission chief in the African department
and representative to the World Trade Organization and United Nations in Geneva.
Mr. Chauffour has extensive economic policy experience and has worked in many
areas of the developing world, most extensively in Africa, the Middle East, and Eastern Europe. He holds master’s degrees in Economics and in Money, Banking, and
Finance from the Panthéon-Sorbonne University in Paris. He is the author of The
Power of Freedom: Uniting Human Rights and Development (Cato Institute, 2009).
Mariem Malouche is an economist in the International Trade Department of
the World Bank, in the Poverty Reduction and Economic Management Network. She joined the Bank in the Middle East and North Africa Region in 2004.
Before joining, Ms. Malouche obtained her Ph.D. in International Economics
from University Paris-Dauphine. Her areas of interest are trade policy, nontariff measures, regional integration, and export diversification.
Contributors
Hyung Ahn, International Finance Corporation, World Bank Group
Donna K. Alexander, Bankers’ Association for Finance and Trade–International
Financial Services Association
Irena Asmundson, International Monetary Fund
Marc Auboin, World Trade Organization

xv


xvi

About the Editors and Contributors

Steven Beck, Asian Development Bank
Ghazi Ben Ahmed, African Development Bank

Nicolas Berman, Graduate Institute of International and Development Studies
Cosimo Beverelli, World Trade Organization
Daniela Carrera, Inter-American Development Bank
Thomas Dorsey, International Monetary Fund
Tore Ellingsen, Stockholm School of Economics, Stockholm University
Daniela Fabbri, University of Amsterdam
Thomas Farole, World Bank
Bonnie Galat, International Finance Corporation, World Bank Group
Adnan Ghani, Royal Bank of Scotland
Jean-Jacques Hallaert, OECD and Groupe d’Économie Mondiale (GEM), Institut
d’Études Politiques de Paris
John Humphrey, Institute of Development Studies
Tan Kah Chye, Standard Chartered Bank
Armine Khachatryan, International Monetary Fund
Leora Klapper, World Bank
Madina Kukenova, World Trade Organization
Jean-Franỗois Lambert, HSBC
Andrei A. Levchenko, University of Michigan and National Bureau of Economic
Research
Logan T. Lewis, University of Michigan and National Bureau of Economic
Research
Inessa Love, World Bank
Philippe Martin, Institut d’Études Politiques de Paris


About the Editors and Contributors

xvii

Anna Maria C. Menichini, University of Salerno and Centre for Studies in

Economics and Finance
Jesse Mora, U.S. International Trade Commission
Fabrice Morel, Berne Union
Ioana Niculcea, International Monetary Fund
William Powers, U.S. International Trade Commission
Rudolf Putz, European Bank for Reconstruction and Development
Douglas Randall, World Bank
Nadia Rocha, World Trade Organization
Christian Saborowski, World Bank
Mika Saito, International Monetary Fund
Thierry J. Senechal, International Chamber of Commerce
Ahmet I. Soylemezoglu, World Bank
Linda L. Tesar, University of Michigan
Koen J. M. van der Veer, De Nederlandsche Bank
Jonas Vlachos, Stockholm University



ABBREVIATIONS

$
AfDB
ADB
AGOA
ALADI
ATL
AVC
BAFT-IFSA
BANCOLDEX
BCBS

BIS
BPLR
BU
CCF
CEPII
CIS
DFI
EBRD
ECA
ECGD
EFD
EFIL
EMIB
ES
EU

All references to “dollars” or dollar amounts ($) are U.S. dollars (US$) unless indicated otherwise.
African Development Bank
Asian Development Bank
African Growth and Opportunity Act
Latin American Integration Association
Agro Traders Ltd.
asset value correlation
Bankers’ Association for Finance and Trade–International
Financial Services Association (merged association)
Banco de Comercio Exterior de Colombia
Basel Committee on Banking Supervision
Bank for International Settlements
Benchmark Prime Lending Rate
Berne Union

credit conversion factor
Centre d’Etudes Prospectives et d’ Informations Internationales
(Centre for Research on the International Economy)
Commonwealth of Independent States
development finance institution
European Bank for Reconstruction and Development
export credit agency
Export Credits Guarantee Department
external financial dependence
Export Finance Insurance Corporation (Australia)
emerging-market issuing bank
Enterprise Survey (World Bank)
European Union
xix


xx

Abbreviations

FCS
FI
FY
G-20
GDP
GTFP
GTLP
ICC
IDA
IDB

IDS
IFC
IFI
IMF
IMF-BAFT
ISIC
IT
KYC
LIBOR
LC
LOC
MFA
MLT
NAICS
NFIB
OECD
RBI
RBS
SBSA
SCF
SMEs
ST
SWIFT
TCD
TFI
TFP
TFP

Financial Crisis Survey (World Bank)
financial intermediary

fiscal year
Group of 20 (countries’) Finance Ministers and Central Bank
Governors
gross domestic product
Global Trade Finance Program (IFC)
Global Trade Liquidity Program (IFC)
International Chamber of Commerce
International Development Association
Inter-American Development Bank
Institute of Development Studies
International Finance Corporation (World Bank Group)
international financial institution
International Monetary Fund
International Monetary Fund–Bankers’ Association for
Finance and Trade
International Standard Industrial Classification
information technology
know-your-customer
London interbank offered rate
letter of credit
line of credit
Multifibre Arrangement
medium/long-term (export credit insurance)
North American Industry Classification System
National Federation of Independent Business
Organisation for Economic Co-operation and Development
Reserve Bank of India
Royal Bank of Scotland
Standard Bank of South Africa
supply chain finance

small and medium enterprises
short-term (export credit insurance)
Society for Worldwide Interbank Financial
Telecommunication
trade credit dependence
Trade Finance Initiative (AfDB)
Trade Facilitation Program (EBRD)
Trade Finance Program (ADB)


Abbreviations

TFFP
TFRP
TWCC
UB
WTO

Trade Finance Facilitation Program (IDB)
Trade Finance Reactivation Program (IDB)
trade-weighted credit contraction
utilization bank
World Trade Organization

xxi



Overview

Introduction
On September 15, 2008, Lehman Brothers, the fourth-largest U.S. investment
bank, filed for bankruptcy, marking the largest bankruptcy in U.S. history and
the burst of the U.S. subprime mortgage crisis. Concerns about the soundness of
U.S. credit and financial markets led to tightened global credit markets around
the world. Spreads skyrocketed. International trade plummeted by double digits,
as figure O.1 illustrates. Banks reportedly could not meet customer demand to
finance international trade operations, leaving a trade finance “gap” estimated at
around $25 billion. The liquidity problem spread from the United States and the
European Union (EU) to developing countries’ markets. As the secondary market dried up in late 2008, the trade finance gap reportedly increased to up to
$300 billion.
In the midst of the crisis, these alarming developments were at the epicenter
of world leaders’ attention. When the G-20 leaders held their first crisis-related
summit in Washington, D.C., in November 2008, their primary objective was to
reach a common understanding of the root causes of the global crisis and agree
on actions to address its immediate effects, including providing liquidity to help
unfreeze credit markets.
The purpose of this book is to provide policy makers, analysts, and other interested parties with a comprehensive assessment of the role of trade finance in the
2008–09 “great trade collapse” (Baldwin 2009) and the subsequent role of governments and institutions to help restore trade finance markets.
The 1997–98 Asian crisis had already illustrated the critical role that trade
finance plays during a financial crisis—especially its effects on trade—but that
crisis remained regionally confined, and international institutions and regulators
largely blamed the opaque financial sector in the affected economies for the crisis.
In contrast, the 2008–09 crisis originated in the United States, one of the most

1